ACIS American Committee for Interoperable Systems ACIS Comments on ``Intellectual Property and the National Information Infrastructure" Introduction The American Committee for Interoperable Systems (``ACIS") submits these comments in response to the Working Group on Intellectual Property Rights (``Working Group") preliminary draft report entitled ``Intellectual Property and the National Information Infrastructure" (hereinafter ``the Green Paper"). ACIS is an informal organization of companies that develop innovative software and hardware products which interoperate with computer systems developed by other companies.1 ACIS was formed to support intellectual property law policies providing for a careful balance between the goals of strong protection and rewards for innovation on the one hand, and the goals of interoperability, fair competition, and open systems on the other. Because the success of the emerging National Information Infrastructure (``NII") will hinge on the interoperability of a multitude of hardware systems, computer programs and other devices, ACIS offers these comments to assist the Working Group in tackling these very difficult but vitally important issues. ACIS commends the Working Group for its efforts to examine the current American intellectual property rights regime in light of the emerging NII. President Clinton's formation of the Information Infrastructure Task Force (``Task Force") to address issues related to the development of the NII has been an important step forward ______________________ 1 A list of ACIS members is attached. -1- in the realization of a new information order. The Working Group's role in the Task Force's efforts cannot be underestimated because intellectual property law can either help or hinder the burgeoning NII. Beyond a doubt, the issues addressed in the Green Paper have no easy solutions. The number of potential problems involving intellectual property rights and the NII is potentially infinite; the Working Group's efforts to grapple with some of these issues should be applauded. Moreover, the Green Paper's analysis of the current state of copyright law is accurate and thorough yet presented in such a way that individuals not steeped in the complex and technical legal doctrine can grasp many of the potential issues of applying copyright law on the so-called ``information superhighway." ACIS concurs with much of the Green Paper's discussion and analysis of the issues addressed. At the same time, ACIS believes that some of the changes proposed by the Green Paper might be inimical to the fundamental purposes of the copyright system. These points of agreement and disagreement are discussed below. I. Points of Agreement With Green Paper ACIS wholeheartedly endorses the Green Paper's discussion of the Second Circuit's seminal opinion in Computer Associates International, Inc. v. Altai, Inc., 982 F.2d 204 (2d Cir. 1988). Such an endorsement of the Computer Associates opinion follows from the Green Paper's recognition that the ``[i]nteroperability and interconnectivity of networks, systems, services and products operating within the NII will enhance its development and success." Green Paper at 139. The Second Circuit's abstraction-filtration-comparison test for copyright infringement, adopted in Computer -2- Associates and applied by federal courts of appeal in other circuits,2 embodies legal principles absolutely critical to innovators seeking to develop hardware and software that is interoperable with systems that have, for either technical or market reasons, become standards. ACIS urges the Working Group and other arms of the Task Force to endorse the principles enunciated in Computer Associates and the cases that have followed it. Such a step would solidify, from a policy perspective, well-founded principles in the copyright law that relate to interoperability. On the other hand, to extend copyright protection to interface specifications that become the standardized rules of interconnection in the NII would hinder interoperability, impede competition and innovation, and serve as a critical impediment to the implementation of the NII and the principles advanced by the Administration. A balance between access to these standards and protection of the implementation of these standards in program code is required and Computer Associates strikes the proper balance, at least with respect to copyright law.3 ACIS also agrees with the Green Paper's conclusion that implementation of the NII requires no fundamental changes in the current copyright law. Green Paper at 10 (only ``minor clarification and amendment" required to Copyright Act). The federal courts have balanced properly the competing concerns that arise in copyright _________________________ 2 See Sega Enters., Ltd. v. Accolade. Inc., 977 F.2d 1510 (9th Cir. 1992); Gates Rubber Co. v. Bando Am., Inc., 9 F.3d 823 (10th Cir. 1993); Autoskill Inc. v. National Educ. Support Sys., Inc., 994 F.2d 1476 (10th Cir.), cert. denied, 114 S. Ct. 307 (1993); Atari Games Corp. v. Nintendo of America. Inc., 975 F.2d 832 (Fed. Cir. 1992); Kepner-Tregoe, Inc., v. Leadership Software. Inc., 12 F.3d 527 (5th Cir. 1993). 3 Similarly, the recognized right to make interim copies of a work in order to separate protected and unprotected elements of a work is essential to interoperability. Such fair uses for the purposes of reverse engineering have been endorsed by at least two federal courts of appeals. See Sega Enters., 977 F.2d at 510; Atari Games Corp. v. Nintendo of America. Inc., 975 F.2d 832 (Fed. Cir. 1992). -3- cases, especially those cases involving standards and issues of interoperability. The courts are capable of interpreting the Copyright Act to address many if not all of the novel questions that will arise from the creation of the NII. II. Points of Disagreement With Green Paper ACIS is concerned, however, that some changes proposed by the Green Paper might, if adopted, upset the delicate balance of competing public policy considerations embodied in the Copyright Act, namely the desire to serve the public interest in the wide dissemination of information and the desire to provide incentives to authors to create new works.4 ACIS agrees that protection of content will play an essential role in the successful development of the NII. At the same time, protection of content cannot be the Working Group's only consideration; an equally important consideration is promoting interoperability. However, overly broad intellectual property protection for standard interface specifications in the NII could inhibit such interoperability, recognized by the Working Group as essential to the success of the NII. See Green Paper at 139. A. Proposed Section 512 The Green Paper's proposed new section 512 to the Copyright Act is particularly problematic. The thrust of the proposed section 512 is to prohibit the importation, manufacture and distribution of devices that circumvent a system or process that prevents illegal copying of protected works. While the goal of providing additional enforcement for section 106 rights is a laudable one, it need not be pursued at the _________________________ 4 These competing concerns have been at the heart of several recent Supreme Court cases addressing copyright issues. See Feist Pubs. v. Rural Tel. Serv. Co., Inc., 499 U.S. 340 (1991); Campbell v. Acuff-Rose Music, 114 S. Ct. 1164 (1994); Fogerty v. Fantasy. Inc., 113 S. Ct. 1023 (1994). -4- expense of other goals embodied in the Copyright Act. The proposed section 512, as drafted, threatens to do just that. First, the ``primary purpose or effect" test contained in the proposed section is vague and hard to apply. Developers of worthwhile products that have completely non-infringing uses will not know how the ``primary purpose or effect" test will be interpreted in litigation years later and will therefore tend to avoid developing and distributing such products. Significantly, the proposed section does not clearly provide for the right to make copies of protected works for purposes of scholarship, research, news reporting and other fair uses specified in section 107 of the Copyright Act, or the right to make copies for other legitimate, legal uses such as making archival copies. See Sega v. Accolade (making interim copy for purpose of reverse engineering is fair use); Vault Corp. v. Quaid Software Ltd., 847 F.2d 255 (5th Cir. 1988) (recognizing right to make archival copies). Without clear protection for legitimate, non-infringing, and fair uses of copyrighted material, and for devices that may be employed for these purposes, the balance will be shifted towards overprotection of individual property rights at the expense of the public good.5 _________________________ 5 One can easily imagine circumstances in which application of the ``primary purpose or effect" test will lead to undesirable results. For example, consider a software vendor who has incorporated an anticopy device in its business software applications. Another vendor develops a mechanism that can circumvent the anticopy device. A year after this mechanism is placed on the market, it is determined that 55% of the copies made using the mechanism are unlawful copies, while 45% of the copies are lawful section 117 archival copies. Under such circumstances, what would be the ``primary purpose or effect" of the mechanism? It seems clear that such a mechanism would be illegal under the proposed section 512. It seems equally clear that this result would be inconsistent with the purposes and policies underlying the Copyright Act. To be sure, the makers of the unlawful copies are infringers and should be liable for damages, and, where appropriate, criminal penalties. At the same time, the vendors of the circumvention mechanism should be free from liability. -5- Indeed, the proposed section is at odds with the rationale of the Supreme Court's opinion in Sony Corporation v. Universal City Studios. Inc., 464 U.S. 417 (1984). The Court in Sony found that Sony could not be held liable for contributory infringement merely because its Betamax video recorder might be used for infringing purposes. The Sony Court carefully balanced the copyright holder's legitimate rights against ``the rights of others freely to engage in substantially unrelated areas of commerce" Id. at 442, and concluded that manufacturers of copying devices cannot be liable for copyright infringement if the device is ``capable of substantial non-infringing uses." Id. ACIS urges that the balance struck in Sony not be disturbed. In addition, the analogies cited by the Green Paper in support of the proposed section are inapposite. The provision contained in the Audio Home Recording Act that prevents the importation, manufacture or distribution of devices that circumvent a Serial Copy Management System SCMS") provides no support for the proposed section 512. In digital audio recording systems that employ a SCMS, the scheme allows the end-user to make at least one digital-to-digital copy of a copyrighted digital original and unlimited copies of a digital source if made through the digital-to-analog converters of the recording device. Thus, the SCMS provides an adequate accommodation to the rights to make fair uses of copyrighted works and to make copies for other legal purposes. The proposed section 512 provides no such accommodation, however, because a copyright holder may implement a scheme whereby no copies of the work, lawful or unlawful, may be made. Therefore, a provision that bans the importation, manufacture or distribution of devices whose ``primary purpose or effect" is to circumvent such a scheme is too rigid and effectively prohibits the exercise of legitimate and legal rights to -6- duplicate protected works. Likewise, section 605 of the Communications Act is not analogous to most all situations that would be covered by the proposed section 512. Section 605 prohibits devices that allow the unauthorized decryption of satellite cable programming. Such decryption is fundamentally different from making copies of protected works because unauthorized decryption involves gaining access to material that the recipient has not paid for and has absolutely no right to see. On the other hand, the lawful owner of a copy of a work not only has the right to view the work but in some instances may make copies of the work without infringing the copyright. See, e.g., Green Paper at 133 (``The Copyright Act exists for the benefit of the public. To fulfill its constitutional purpose, the law should strive to make the information contained in protected works of authorship freely available to the public.") A broad prohibition on decryption devices is therefore tolerable in the satellite cable programming context, but a prohibition similar to the proposed section 512 is not appropriate in a broader copyright context. ACIS members agree with the Green Paper that the NII may present unique issues of enforcement and protection of legitimate copyrights. These concerns, however, can be addressed by a narrower, carefully crafted regulation of devices designed to defeat anti-copying systems that focuses on the uses to which those devices are put rather than the devices themselves. In particular, ACIS suggests a provision that tracks the approach taken by the European Union (EU) on this issue. Article 7 of the 14 May 1991 Council Directive provides in relevant part: 1. Without prejudice to the provisions of Articles 4, 5 and 6, Member States shall provide, in accordance with their national legislation, appropriate remedies against a person committing any of the acts listed in subparagraph[](c) below: -7- . . . . (c) any act of putting into circulation, or the possession for commercial purposes of, any means the sole intended purpose of which is to facilitate the unauthorized removal or circumvention of any technical device which may have been applied to protect a computer program. Notwithstanding this anti-copying provision, the Directive makes clear that such protection does not prohibit the legitimate copying of programs. Articles 4, 5 and 6 of the EU Directive describe the rights of the copyright holder and the rights of the public to copy or disassemble a work. These rights are similar to those granted to the public under the Copyright Act and recognized by the case law. For example, Article 5(2) allows the making of a backup copy; Article 5(3) allows a legal holder of a copy of a program to study the functioning of the program to determine its underlying ideas and principles; and Article 6 provides for the right to decompile a program to make interoperable programs. The EU provision provides clearer guidelines for legal and legitimate copying than the proposed section 512 while not sacrificing the important goal of prohibiting piracy. Moreover, the EU provision minimizes the risk of chilling the development of legitimate and desirable products by eschewing the ``primary purpose or effect" test in favor of a ``sole intended purpose" test. ACIS therefore suggests that any proposed changes to the Copyright Act follow the EU's approach. B. Proprietary Standards A second area of concern to ACIS is the uncertainty regarding the Working Group's views on whether elements of works that become standards may have proprietary content. The Green Paper as drafted contains some references to -8- intellectual property rights that may exist in standards, but the scope and nature of the rights to which the Working Group refers is unclear. The Green Paper outlines no concrete proposal on this issue; nonetheless, ACIS is concerned about the implications of the notion that standards for interoperability may have proprietary content. If the Working Group is referring to patents on an invention that has become an industry standard, the proposition is relatively uncontroversial, assuming that the invention can meet the strict statutory standards of novelty and non-obviousness. If, however, the reference is to asserted copyright interests in a software interface or other interface standard, the proposition is problematic in light of current copyright law. The Second Circuit's decision in Computer Associates and its progeny make clear that those elements of a software program that are essential to create interoperable systems or programs, i.e., interface specifications, are not protectible expression. Under the Computer Associates analysis, these functional elements are filtered out and the remaining, expressive elements of the work are accorded copyright protection. The question of access to critical interfaces in the context of the NII is still unclear. This is one of the issues being discussed in the context of telecommunications reform legislation currently pending in Congress. Section 405 of H.R. 3626, as passed by the House, deals with interoperability and access to interfaces and acknowledges that monopoly control of critical interfaces could produce bottlenecks at critical NII junctures.6 As the issue of standards and interoperability are central to the development ________________________ 6 In fact, the language of the bill passed by the House shows a strong preference for the development of open and accessible NII systems. See H.R. 3626 (``in order to promote diversity, competition, and technological innovation among suppliers of equipment and services, it may be necessary to make certain critical interfaces with such networks open and accessible to a broad range of equipment manufacturers and information providers"). -9- of a robust NII, the Working Group's conclusions should make clear its position on the issue, taking into account the case law and the relevant policy considerations. C. Antitrust and Intellectual Property ACIS is also concerned with the Green Paper's conclusion that intellectual property rights inhering in de facto technological standards pertaining to the NII can be ``reigned in" through federal antitrust laws. Given the importance of the development of an open and accessible NII, we must be vigilant in preventing control, through the exercise of ``intellectual property rights," of the standard interface specifications critical to the operation of the NII. The primary focus, however, for controlling the abuse of intellectual property rights that are or become de facto NII interface standards should be the intellectual property law itself, not the antitrust laws. The intellectual property law balances the goals of incenting and rewarding creativity, originality and innovation, on the one hand, and disseminating ideas and information for use by society generally, on the other hand. Thus, the intellectual property law promotes the maximization of consumer welfare and the progress of society. The public welfare is diminished if this balance tips in favor of overprotecting the first set of interests at the expense of the latter interests. Such loss of welfare occurs even in circumstances when the imbalance does not confer market power on particular individuals or firms, the point at which the imbalance triggers concern under the antitrust laws. Therefore, while the antitrust laws have an important role in policing open standards, they cannot be relied upon to be the sole, or even the primary focus for maximizing social welfare. -10- For additional reasons, it is doubtful that without a primary focus on properly defining intellectual property rights, the antitrust laws can be effective in making de facto NII interface standards sufficiently open to protect the public interest. The antitrust laws' concern about the unlawful use of market power becomes dangerously circular if the alleged abuse flows from overbroad intellectual property rights.7 Fundamentally, any market power created by the ownership of standards for interoperability is in part the result of the scope of protection afforded. If the scheme of such rights is too broad, we cannot expect the antitrust laws to remedy the situation. A second and more practical point is the difficulty of policing abuses of de facto NII standards through the antitrust laws. Comprehensive antitrust investigations and private enforcement are time-consuming and expensive; the time and expense _________________________ 7 This circularity is apparent from the following hypothetical example: A small vendor seeks to distribute its new and innovative product on the NII, but to distribute the product it must make use of a standard protocol owned by another company. Because the protocol has become a standard on the NII, the vendor must obtain a license from the protocol owner. The vendor negotiates with the owner of the protocol to obtain a license, but negotiations break down and the rights holder eventually refuses to license the protocol to the vendor. The vendor, apparently having no other recourse, approaches the Department of Justice, asserting that the rights holder's refusal to license the protocol is a violation of antitrust laws. The Department of Justice refuses to take any action against the rights holder, citing its Guidelines For the Licensing and Acquisition of Intellectual Property (presumably by this time the Guidelines would have been formally adopted by Justice). See Draft Antitrust Guidelines # 2.2, 59 Fed. Reg. 41,340 (1994) (``Nor does such market power [conferred by ownership of intellectual property] impose on the intellectual property owner an obligation to license that technology to others.") (citations omitted). The rationale is that if the rights holder has a valid property interest in the protocol, its decision to exclude a competitor from using the protocol should not be illegal. The problem of abuse of de facto NII standards, therefore, cannot be addressed solely by the antitrust laws. Under the scheme advanced by the Green Paper, however, the vendor has no recourse under the intellectual property laws either because of the mistaken notion that ``unfair licensing practices can be dealt with through the antitrust laws." Thus, the scope of any property rights in de facto standards should be addressed by defining properly the scope of the applicable intellectual property rights. -11- required to conduct an adequate investigation of monopolistic uses of NII standards could prove disastrous to free competition, and allow the holders of standards to kill their competitors at a critical time in the development of the NII. The uncertain outcomes of such antitrust ``solutions" are an additional impediment to businesses attempting rationally to structure strategies in relation to the NII. It seems far more efficient to focus on the scope of the rights in the first instance, rather than trying to curb their abuse after the fact. Conclusion ACIS believes that intellectual property law will play an important role in the successful development of the emerging NII. In general, intellectual property law is capable of addressing the issues likely to be raised during the development of the NII. Major changes or wholesale revision of intellectual property law is therefore unnecessary; instead, only some minor modifications are needed. The intellectual property law should be used to shape the emergence of the NII in the following ways: 1. The abstraction-filtration-comparison test in Computer Associates and adopted by other cases should be applied to all claims of copyright infringement of standards for interoperability. The government should endorse this approach and urge other courts to adopt it. 2. Protection of content that will flow over the NII is essential. Our zeal to protect it, however, should not be at the expense of other equally important considerations. In this regard, any regulation of devices designed to defeat anti-copying systems should be narrowly and carefully crafted. ACIS suggests a provision similar to Article 7 in the EU Directive or employing a ``substantial noninfringing use" test. -12- 3. Proprietary rights in NII standards for interoperability should be very narrow. Ensuring open access to NII standards for interoperability should not be made primarily the purview of antitrust law, although antitrust law will have a role to play. Rather, the proper balance between the public interest and the rights of creators of standards of interoperability falls within the traditional purview of intellectual property law. September 7, 1994 -13- MEMBERSHIP LIST Accolade, Inc. Advanced Micro Devices Amdahl Corporation America Online, Inc. AT&T Global Information Solutions Broderbund Software, Inc. Bull HN Information Systems Inc. Chips and Technologies, Inc. Clearpoint Research Corporation Color Dreams, Inc. Comdisco, Inc. Emulex Corporation Forecross Corporation The Fortel Group Fujitsu Systems Business of America, Inc. Hitachi Data Systems ICTV Integrated Document Applications Corporation Johnson-Laird, Inc. Kapor Enterprises, Inc. Landmark Systems Corporation LCS/Telegraphics MidCore Software, Inc. New York Systems Exchange, Inc. Octel Communications Corporation Phoenix Technologies, Ltd. Plimoth Research, Inc. Seagate Technology, Inc. Software Association of Oregon1 Software Entrepreneurs Forum2 Storage Technology Corporation Sun Microsystems, Inc. Tandem Computers, Inc. 3Com Corporation Western Digital Corporation Zenith Data Systems Corporation ------------ 1 The Software Association of Oregon consists of 430 software development firms, firms in associated industries, and individuals professionally involved in software development. 2 The Software Entrepreneurs Forum consists of over 1,000 software entrepreneurs and developers. September 1, 1994 --------------------------------------------------------------------------- - file last updated 24 May, 1995 - Questions or comments regarding this service? webmaster@sun.com Copyright 1995 Sun Microsystems, Inc., 2550 Garcia Ave., Mtn. View, CA 94043-1100 USA. All rights reserved.